Tampa Bay's housing market relearned a hard lesson in October: Foreclosures may be good for bringing out home buyers. But they're a major drag on housing values. Home prices fell 1.6 percent from September to October, erasing modest gains from June to August, according to the S&P Case-Shiller home price index. Tampa Bay was the top price loser among 20 housing markets on the October index. "Coming after a series of solid gains, these data are likely to spark worries that home prices are about to take a second dip," said David Blitzer, chairman of the Index Committee at Standard & Poor's.
Blitzer doesn't necessary adhere to the double dip theory, but he suggested foreclosures played havoc with home prices. And Tampa Bay, where more than a third of sales in October involved distressed properties, certainly felt the squeeze.
"Foreclosures are erratic. It's not a steady number each month. If banks released a large number of foreclosures, and you had a huge jump in sales, that would affect prices," Blitzer said.
The Case-Shiller index lags Realtor numbers by a month but gets kudos for accuracy because it compares repeat sales of individual homes in a market. It shows Tampa Bay home prices peaked in June 2006.
October housing values were the lowest in six years and duplicated those recorded in September 2003. Since the peak, home prices have fallen 41 percent.
"The housing sector is trying to find a new equilibrium, but with so much inventory on the market the pressure on prices will continue," said University of Central Florida economist Sean Snaith.
That pricing pressure is epitomized by a typical home sale in central St. Petersburg.
The 1,000-square-foot home on Fourth Avenue N in Historic Kenwood sold for $169,000 as the market crested on May 30, 2006. Within three years the bank foreclosed on the house and dumped the World-War-II-era property to an investor for $48,000.
That investor flipped the house in October for $88,000. The three-year price plunge: 48 percent.
October's price decline coincided with heavy use of the $8,000 first-time home buyer tax credit. While the credit arguably acted as a price support in some parts of the country, that wasn't the case in Tampa Bay. The credit was set to expire on Nov. 30, and sellers used price concessions to speed deals along.
The government has since expanded and extended the credit for home sales contracts signed up to April 30.
St. Petersburg Realtor James Tuten, two-thirds of whose listings are pre-foreclosure or foreclosure properties, said the credit actually stimulates house hunters to seek out cut-rate properties.
"If you're a normal home seller whose house isn't in foreclosure, you're in a tough spot," Tuten said. "Nobody's going to overpay right now."
The foreclosure outlook remains murky. High unemployment and significant home depreciation encourage people to walk away from mortgages. On the other hand, government anti-foreclosure subsidies, combined with Florida's decision this week to nudge defaulting homeowners into mediation with lenders, could ease the crisis.
On the Case-Shiller index, San Francisco and Phoenix posted the largest monthly home price increases. Las Vegas remains the biggest basket case. Prices in the Southwestern Shangri-la have declined for 38 straight months and are 55.4 percent below their peak.
"At least you're not like Las Vegas," Blitzer said of Tampa Bay. "You don't want to be like them."
James Thorner can be reached at email@example.com or (813) 226-3313.